FEDERAL COURT OF AUSTRALIA Sogelease Australia Ltd v Griffin, in the matter of D J Griffin [2003] FCA 453 BANKRUPTCY – creditors' petition – mode of service on a debtor – whether personal service required – whether service of a petition is "required or permitted" by the Bankruptcy Act 1966 (Cth) or the Bankruptcy Regulations 1996 (Cth) – where personal service not effected – operation of Bankruptcy Regulations 1996 (Cth) reg 16.01 PRACTICE & PROCEDURE – creditors' petition – mode of service on a debtor – whether personal service required – petition as originating process of the Federal Court – operation of Federal Court Rules O 7 r 1 Bankruptcy Act 1966 (Cth) ss 27, 31, 40, 41, 43, 52, 85, 139A, 139B, 140, 306, 309, 315 Bankruptcy Legislation Amendment Act 1996 (Cth) Federal Court Act 1976 (Cth) s 51 Bankruptcy Regulations 1996 (Cth) reg 16.01 Bankruptcy Rules r 15 Federal Court Rules O 1 r 8, O 1 r 11, O 7 r 1, O 7 r 2, O 7 r 9, O 7 r 10, O 9 r 6, O 9 r 7, O 77 SOGELEASE AUSTRALIA LTD & ANOR v DAVID JAMES GRIFFIN, IN THE MATTER OF D J GRIFFIN N 7101 OF 2003 EMMETT J 1 MAY 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N7101 OF 2003 BETWEEN: SOGELEASE AUSTRALIA LIMITED ACN 002 093 030 FIRST APPLICANT CREDITOR SG AUSTRALIA LIMITED ACN 002 093 021 SECOND APPLICANT CREDITOR AND: DAVID JAMES GRIFFIN RESPONDENT DEBTOR JUDGE: EMMETT J DATE OF ORDER: 1 MAY 2003 WHERE MADE: SYDNEY THE COURT DECLARES THAT: 1. pursuant to O 9 r 7(1)(c), the petition filed in this proceeding has not been duly served on the respondent. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N7101 OF 2003 BETWEEN: SOGELEASE AUSTRALIA LIMITED ACN 002 093 030 FIRST APPLICANT CREDITOR SG AUSTRALIA LIMITED ACN 002 093 021 SECOND APPLICANT CREDITOR AND: DAVID JAMES GRIFFIN RESPONDENT DEBTOR JUDGE: EMMETT J DATE: 1 MAY 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I have before me an application under O 9 r 7 of the Federal Court Rules for a declaration that a bankruptcy petition has not been duly served on the respondent debtor to the proceeding. The petition in question ('the Petition') was filed by Sogelease Australia Limited and SG Australia Limited (together 'the Creditors') on 2 April 2003. By the Petition, the Creditors apply for a sequestration order under the Bankruptcy Act 1966 (Cth) ('the Act') against the estate of David James Griffin ('the Debtor'). The Debtor has filed a conditional appearance for the purpose of seeking the declaration and has filed notice of grounds of opposition relying solely on the ground that the Petition has not been served on him. REQUIREMENTS FOR PERSONAL SERVICE 2 It is common ground that, in so far as it is relevant, the Petition is 'originating process' within the meaning of O 7 r 1(1) and that it has not been 'served personally on' the Debtor within the meaning of that phrase as used in O 7 r 1(1). The Creditors claim, however, that it is not necessary for a bankruptcy petition to be served personally on a debtor. Alternatively, the Creditors say that, if a petition must be served personally on a debtor, compliance with that requirement should be dispensed with pursuant to O 1 r 8 or, in the circumstances of the case, the Court should make an order under O 7 r 10 that the Petition be taken to have been served on the Debtor. 3 The Creditors propose to move for orders under O 1 r 8 or O 7 r10. The Creditors will also apply, in the alternative, if necessary, for an order under s 309(2) of the Act, which provides, relevantly, that, where a document is required by the Act to be served on a person, the Court may, in a particular case, order that it be served in a manner specified by the Court, whether or not any other manner of serving the document is prescribed. I have deferred consideration of any such application until I have disposed of the Debtor's application under O 9 r 7 for a declaration that the Petition 'has not been duly served on' the Debtor. 4 On the hearing of the Debtor's application under O 9 r 7, the Creditors have sought to rely on all of the evidence upon which they would rely in any application under O 1 r 8 or O 7 r 10 as a basis for declining, in the exercise of discretion, to make a declaration under O 9 r 7. I propose to approach the matter on the basis that there is a discretion under O 9 r 7 to decline to make a declaration even though there has been no due service of originating process, at least in circumstances where to do so would be of no utility. The Creditors say that it would be futile to make such a declaration if the Court would, in any event, make an order under O 1 r 8 or O 7 r 10. 5 Order 7 r 1(1) provides that, subject to the provisions of O 7, originating process shall be served personally on each respondent. Rule 2(1)(a) provides that personal service of a document is effected on an individual by leaving a copy of the document with him or her. Rule 2(2) provides that if a person refuses to accept service of the document, personal service may be effected on him or her by putting the document down in his presence and telling him or her the nature of it. 6 However, O 7 r 10 provides that, where for any reason it is impractical to serve a document in the manner set out in the Rules, but steps have been taken to bring the document to the notice of the person to be served, the Court may order that the document be taken to have been served on that person on a date specified in the Order. Order 1 r 8 also provides that the Court may dispense with compliance with any of the requirements of the Rules, either before or after the occasion for compliance arises. 7 Order 7 r 1(3) provides that, if a respondent to an originating process enters an appearance or appears before the Court in response to the process, the originating process is taken to have been served on the respondent personally. Order 9 r 6(1) provides that a respondent may enter a conditional appearance. A conditional appearance does not have the consequences contemplated by O 7 r 1(3). However, O 9 r 6(2) provides that a conditional appearance is to have effect for all purposes as an unconditional appearance, unless the Court otherwise orders or the respondent applies under and in accordance with O 9 r 7 and the Court makes an order under that rule. 8 Order 9 r 7 relevantly provides that the Court may, on application made by a respondent to any originating process, declare that 'the originating process has not been duly served on the respondent'. By his notice of motion filed on 22 April 2003, the Debtor seeks, inter alia, an order: 'declaring that the original process has not been duly served on the respondent.' That motion has been filed in the Petition proceeding and that is the only relief pressed. 9 The Creditors contend that a bankruptcy petition does not need to be served personally on a debtor by reason of the operation of reg 16.01 made under the Bankruptcy Regulations 1996 (Cth) ('the Regulations'). Regulation 16.01(1) relevantly provides that, unless the contrary intention appears, where a document is required or permitted by the Act or the Regulations to be served on a person, the document may be left, in an envelope or similar packaging marked with the person's name, at the last-known address of the person. Regulation 16.01(2) relevantly provides that a document served on a person in accordance with reg 16.01(1) is taken, in the absence of proof to the contrary, to have been served on the person when the document is so left. 10 Regulation 16.01 was made pursuant to the power conferred by s 315 of the Act. Section 315(1) in its present form authorises the making of regulations prescribing matters as necessary or convenient to be prescribed for carrying out or giving effect to the Act. Section 315(2)(g) provides that, in particular, the Regulations may provide for the means of service of documents. No contention has been advanced to cast doubt on the validity of reg 16.01. All of the argument has been directed to the proper construction of the Regulations. 11 The Creditors also rely on the effect of s 306 of the Act and s 51 of the Federal Court of Australia Act 1976 (Cth), which are in similar terms. Their effect is that proceedings either under the Act or the Federal Court of Australia Act are not to be invalidated by a formal defect or an irregularity unless the Court is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of the Court. 12 On one view, a declaration made under O 9 r 7 would not necessarily dispose of the question of service of the Petition. That is to say, if reg 16.01 brought into existence a regime for service of bankruptcy petitions, subject to the operation of s 306 and s 309 of the Act, that regime may apply irrespective of the Federal Court Rules. A declaration under O 9 r 7 that originating process had not been 'duly served' on the Debtor would be limited to the operation of the Federal Court Rules. Order 9 r 7(1)(c) should be construed by reference to provisions such as O 7 r 9 and r 10, which speak in terms of service 'in the manner set out in the Rules'. That is to say, O 9 r 7 is concerned only with service of originating process under the Rules. 13 On that view of O 9 r 7, the true construction of reg 16.01 would have no bearing on the question of whether the Petition has been 'duly served' on the Debtor. In that case, even if it were concluded that the petition has not been served personally on the Debtor and, accordingly, has not been 'duly served' on the Debtor, there would be no utility in making a declaration that the Petition has not been duly served if reg 16.01 regulated that question. I consider that the Petition has not been duly served on the Debtor as that term is used in O 9 r 7(1)(c). That, of course, is not an end of the matter, so far as effective service of the Petition is concerned, because of the possible operation of reg 16.01(1). 14 Regulation 16.01 was enacted with effect from 16 December 1996, the date of commencement of the Bankruptcy Legislation Amendment Act 1996 (Cth) ('the Amendment Act') which effected a number of amendments to the Act, including the amendment of s 315. On the same day, O 77 was introduced into the Federal Court Rules in a form different from its current form. In that earlier form, O 77, in effect, adopted, as rules of the Federal Court, the Bankruptcy Rules made under s 315 of the Act prior to its amendment. In that earlier form, s 315 authorised the making of 'rules'. Before 16 December 1996, O 1 r 11 provided that, in relation to proceedings under the Act, the practice and procedure of the Court was to be in accordance with the Bankruptcy Rules. 15 The current form of O 77 came into force on 31 July 1997. There appears to have been no formal repeal of the Bankruptcy Rules made under s 315 in its earlier form. Nevertheless, the Bankruptcy Rules as made under s 315 should probably be taken to be of no force or effect from 16 December 1996 following the repeal of the power to make rules. 16 Rule 15 of the Bankruptcy Rules provided that, unless otherwise ordered by the Court under s 309(2) of the Act, service of a bankruptcy notice was to be effected on a debtor by delivering a copy of the bankruptcy notice to the debtor personally. Under that rule service of a creditor's petition was to be effected on a debtor by delivering, inter alia, an official copy of a petition to the debtor personally. As I have indicated, that provision continued in force after 16 December 1996 as a rule of the Federal Court with effect from that time. Thus, if reg 16.01 applies in relation to bankruptcy notices and petitions under the Act, there may have been some inconsistency between reg 16.01, on the one hand, and the Federal Court Rules, on the other. However, any such apparent inconsistency may be non-existent by reason of the proviso to the Federal Court Rules which preserved the Bankruptcy Rules (as O 77) only in so far as they were not inconsistent with the Act and the Regulations. STEPS TAKEN TO EFFECT SERVICE 17 The Debtor and Maree Leigh Griffin are the registered proprietors as joint tenants of a parcel of land situated at Lane Cove known as 21 Riverview Street, Lane Cove. The Sydney telephone directory includes an entry for 'D.J. Griffin' at 21 Riverview Street, Riverview, which is situated in the municipality of Lane Cove. There is no evidence that the Debtor has a more recent address than 21 Riverview Street, Lane Cove ('the Lane Cove Premises'). I conclude that the premises known as 21 Riverview Street, Lane Cove constitute the usual place of residence of the Debtor. 18 On 10 March 2003, the Debtor was served with a bankruptcy notice at the Lane Cove Premises. At 12.38 pm on 5 April 2003, Mr Bruce Andrews, a licensed commercial subagent, attended the Lane Cove Premises. He spoke to a woman who identified herself as the Debtor's wife. He asked her: 'Would D.J. Griffin be home?'. She replied: 'No. He is not. I am his wife. He is out shopping'. At 5.20 pm on the same day, Mr Andrews attended the Lane Cove Premises again and spoke with the same woman. He asked her: 'Would D.J. Griffin be at home yet?'. She replied: 'No. He is not home. He is out for the night'. 19 On 7 April 2003 at 8.10 pm, 8 April at 6.37 am and at 5.37 pm, 9 April at 6.23 pm and 10 April at 8.05 pm and 9.14 pm, Mr Andrews called at the Lane Cove Premises again and found them apparently unattended at those times. 20 On 11 April 2003 at 7.26 pm, Mr Andrews spoke again to the same woman and asked her whether the Debtor was at home. She replied: 'No. He is not. He will be away all weekend. His father is in hospital and he is visiting'. 21 Mr Andrews called at the Lane Cove Premises again on 13 April at 7.53 pm, on 14 April at 6.07 am, 6.12 pm and 9.38 pm and on 15 April at 7.05 am. On each of those occasions the Lane Cove Premises were apparently unattended. 22 At 6.18 am on 17 April 2003, Mr Andrews again attended the Lane Cove Premises and left there a copy of the Petition and supporting affidavits and a consent to act as trustee. He left the documents between the wire screen door and front door of the Lane Cove Premises and closed the wire screen door. 23 On 17 April 2003 at 6.30 pm and 20 April 2003 at 4.30 pm, Mr Andrews again attended the Lane Cove Premises and found them apparently unattended. The documents that he had left between the wire screen door and the front door were no longer there. He made a further call at 6.20 am on 22 April 2003 when he observed a blue Camry motor vehicle parked in the drive. There is no indication that he made any attempt to speak to any occupant of the Lane Cove Premises on that occasion. 24 On 17 April 2003, the Debtor's wife, on returning home during the morning found a copy of the Petition pushed halfway under the security screen door at the front of the Lane Cove Premises. 25 The bankruptcy notice served on the Debtor is based on a judgment of the Supreme Court of New South Wales. By the bankruptcy notice, the Creditors required payment of the sum of $11,664,588.18, being the amount of the judgment debt. Messrs North & Badgery, solicitors, acted on behalf of the Debtor in those proceedings. Messrs North & Badgery also instructed senior counsel who appeared for the Debtor on the hearing of the application for a declaration under O 9 r 7. 26 On 15 April 2003, Ms Kylie Holt, an employee of the Creditors' solicitors, placed in an envelope a number of documents, including a copy of the Petition and supporting affidavits. The envelope was given to Ms Melanie Walsh, another employee of the Creditors' solicitors, with a request to deliver the envelope to North & Badgery. At approximately 3.25 pm on the same day, Ms Walsh delivered the envelope to a secretary at the offices of North & Badgery saying 'I have a delivery for John North'. The secretary said: 'I am Renee, I can take that for him'. 27 I am satisfied that steps have been taken to bring the Petition to the attention of the Debtor. However, I would not be persuaded that it is impractical within the meaning of O 7 r 10 to serve the Petition on the Debtor personally. While many visits have been made to the Lane Cove Premises by Mr Andrews, there was no one in attendance except on three of those occasions. Several of the calls were made in Easter week when people may be away from home. There is no reason to doubt the reason given by the Debtor's wife for his absence on the occasions when Mr Andrews spoke to the Debtor's wife. Accordingly, I would not be prepared to make an order under O 7 r 10. 28 Mr J F S North is the solicitor for the Debtor. He has been informed by the Debtor that 'he personally has not physically received any copy of the [P]etition'. He has also been informed by the Debtor that 'at no stage has personal service of the [P]etition been effected upon him by leaving a copy of the document with him'. The Debtor has chosen not to give any evidence in relation to that matter. I am quite satisfied that the Petition, including its return date, has come to the attention of the Debtor and that he has chosen not to oppose the Petition, except conditionally, notwithstanding his awareness of the Petition. I may, therefore, be disposed to make an order under O 1 r 8 dispensing with compliance with the requirement of O 7 r 1 for personal service of the Petition or, possibly, an order under s 309(2) of the Act that the Petition be served otherwise than in accordance with O 7 r 2. 29 On the other hand, I do not consider that want of service in accordance with the Federal Court Rules is a formal defect or irregularity within the meaning of s 306 of the Act or s 51 of the Federal Court of Australia Act. 30 Notwithstanding that I may be disposed to make orders under O 1 r 8 or, possibly, s 309(2) of the Act when applications for those orders are dealt with, I consider that it is appropriate to make a declaration under O 9 r 7 that the Petition has not been duly served on the Debtor. As I have said, however, I take O 9 r 7 to apply only to service in the manner provided for in the Federal Court Rules. A declaration under O 9 r 7 does not deal with the question of whether or not, by the operation of reg 16.01, the Petition should be taken to have been served. Nevertheless, I shall deal with construction of reg 16.01 before making such a declaration. CONSTRUCTION OF REGulation 16.01 31 The question of the construction of reg 16.01 is not without difficulty. The matter has been considered on several occasions by judges of the Court, but it appears that no judge has yet found it necessary to express a final view as to whether reg 16.01 regulates the service of a bankruptcy petition. Since the Creditors press for the hearing of the Petition, it will be necessary for me to reach a conclusion as to whether the Petition should be taken to have been served, notwithstanding that the requirements of O 7 r 1 have not been complied with. 32 A similar question may arise under reg 16.01 concerning its application to service of a bankruptcy notice. That question does not arise in the present proceeding, however, because the bankruptcy notice, failure to comply with which constituted the act of bankruptcy upon which the Petition is founded, was served personally on the Debtor. 33 Following the commencement of the Amendment Act on 16 December 1996, a new regime concerning bankruptcy notices came into force. The Court has no involvement in the issue of a bankruptcy notice. Section 41(1) of the Act provides that an Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor a final judgment or final order that is described in that provision. 34 Section 40(1)(g) relevantly provides that if a creditor, who has obtained against a debtor a final judgment or order, has served on the debtor a 'bankruptcy notice under the Act' and the debtor does not comply with the requirements of the notice, the debtor commits an act of bankruptcy. It may be that, in the light of s 40 and s 41, it might fairly be said that a bankruptcy notice is a document permitted by the Act to be given or sent to or served on a person. I express no view on that question. The issue of a bankruptcy notice is not a condition precedent to the commission of an act of bankruptcy. Section 40(1) specifies eighteen other cases in which an act of bankruptcy will be committed by a debtor. I do not consider, therefore, that a bankruptcy notice is a document required by the Act to be given or sent to or served on a person. 35 However, bankruptcy petitions are in a different category from bankruptcy notices. A petition is a court process. Section 43(1) provides that, subject to the Act, where a debtor has committed an act of bankruptcy and, at the time when the act of bankruptcy was committed, the debtor had a relevant connection with Australia, the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor. Section 52(1) provides that at the hearing of a creditor's petition, the Court must require proof of, among other things, the service of the petition. If the Court is satisfied with the proof of the matters specified, including service of the Petition, the Court may make a sequestration order against the estate of the Debtor. Thus, service of a petition, whatever that may be, is a condition precedent to the making of a sequestration order. 36 There is no requirement of the Act that a petition be served, in the sense of imposing an obligation upon a creditor. A creditor is free to determine whether it will present a petition to the Court and is also free, after presentation of a petition, to decide whether or not to serve the petition on the debtor. Of course, a sequestration order cannot be made until those events occur but in no sense is there any requirement that they occur. 37 To permit an act is to allow the doing or occurrence of the act or to give leave or opportunity for the act. The Act does not permit the service of a petition in any such sense. In so far as the Act does not prohibit the service of a petition or specify the manner in which a petition must be served, it 'permits' a petition to be served in some sense. In that sense, however, the Act also permits any other act that might be committed by any creditor or any other person in any circumstances. I do not consider that the Act, in any relevant sense, permits a petition to be served on a debtor. 38 There are other provisions of the Act that contemplate serving documents. Thus, assuming reg 16.01 does not regulate the service of a petition, there is still ample work for reg 16.01 to do. For example, s 85(2A) of the Act provides that where a trustee in bankruptcy is of the opinion that it is desirable that certain matters contained in a proof of debt should be verified, the trustee 'may serve on the person a written notice' (emphasis added). Such a written notice would be a document permitted by the Act to be served on a person. Section 139A of the Act provides that a trustee in bankruptcy may apply to the Court for an order under Div 4A in relation to an entity described in Div 4A as a respondent entity. Section 139B then provides that an applicant under s 139A 'shall serve the application on the respondent entity' (emphasis added) and 'may serve the application on any other person or entity' (emphasis added). Such an application may be a document both required and permitted by the Act to be served on a person within the meaning of reg 16.01. 39 The Act also contains many provisions which require the giving of documents to persons. There are also provisions whereby the Act imposes an obligation to 'send notice' to persons. Thus, s 140(5) provides that a trustee in bankruptcy 'shall, before declaring a dividend … send notice of his or her intention to do so to each person who … claims to be … a creditor but has not lodged a proof of debt …' (emphasis added). 40 The Federal Court of Australia Act and the Federal Court Rules regulate the process and procedures of the Federal Court. A petition, as an originating process of the Court, would be expected to be dealt with in the same fashion as any other originating process of the Court. Ordinarily, originating process of a superior court is required to be served personally on a respondent who is an individual. It would be curious if reg 16.01 made less rigorous the requirements for bringing to the attention of a debtor a petition for the sequestration of his or her estate than an application to the Court for, say, the payment of damages. The consequences of a sequestration order on the status of a debtor are highly significant. 41 A distinction should be drawn between the procedure of a court, on the one hand, and the administration of bankrupt estates, on the other. The nature of the relief claimed in a petition, as compared with other documents that might be permitted or required to be served under the Act or the Regulations, is such that a contrary intention is to be found in the Act concerning the manner in which a petition should be served. 42 Section 27(1) of the Act provides that the Federal Court (concurrently with the Federal Magistrates Court) has jurisdiction in bankruptcy. Section 31(1) provides that, in exercising jurisdiction under the Act, the Court must hear and determine creditors' petitions in open court. Those provisions indicate, in my view, that the regime to be applicable to a petition is a matter for the Court exercising jurisdiction and not for the Regulations made under the Act. 43 I do not consider that reg 16.01 has any application to the service of a bankruptcy petition. Regulation 16.01 does not have the effect of negating the requirements of O 7 r 1 for service personally on a debtor of originating process consisting of a bankruptcy petition seeking a sequestration order under the Act. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 14 May 2003 Counsel for the Applicant Creditors: G C Lindsay SC with P A Fury Solicitor for the Applicant Creditors: Piper Alderman Counsel for the Respondent Debtor: A W Street SC with G D Wendler Solicitor for the Respondent Debtor: North & Badgery Date of Hearing: 29, 30 April, 1 May 2003 Date of Judgment: 1 May 2003